The mechanisms that regulate repair of chronic liver injury are poorly understood. Mature hepatocyte proliferative capacity declines during chronic injury. To compensate for this, hepatic epithelial progenitor populations expand and differentiate to replace dying cells. Similar responses occur in the mesenchyme, enriching hepatic stellate cell (HSC) populations with proliferating myofibroblastic cells. Successful reconstruction of liver architecture occurs when mesenchymal-epithelial (M-E) interactions orchestrate balanced expansion and differentiation of both epithelial and mesenchymal cells. However, defective remodeling leads to disorganization of hepatic architecture, resulting in cirrhosis and neoplasia. M-E interactions that involve the Hedgehog (Hh) signaling pathway modulate repair of some adult tissues. We recently discovered that healthy adult livers contain cells that are capable of both producing and responding to Hh ligands. Interestingly, this Hh-reactive population includes immature liver epithelial cells and hepatic stellate cells. Both cell types play important roles in liver repair, suggesting the following HYPOTHESIS: Hedgehog signaling-mediated mesenchymal-epithelial interactions regulate regeneration of adult livers. We found that injury-related factors, such as PDGF-BB, promote the outgrowth of myofibroblastic cells that produce Sonic hedgehog (Shh) to auto-regulate their viability. Liver injury also expands populations of immature bile ductular cells that produce Indian hedgehog (Ihh), while significantly reducing hepatic expression of the Hh inhibitor, Hip. This is accompanied by expansion of stromal and epithelial cell populations that express Hh-target genes, such as Ptc and/or Gli. Double immunofluorescence staining reveals that Ihh expression is relatively restricted to bile ductular cells, while both epithelial and stromal cells express Hh-target genes. Progenitor populations seem to be relatively enriched with Hh-responsive cells. As liver damage resolves, fibrosis, myofibroblastic cells, and epithelial progenitors regress and Hh-pathway activity gradually subsides. These data support our hypothesis and justify further efforts to delineate mechanisms that control Hh activity in adult livers and clarify the role of the Hh pathway in regulating how adult livers respond to injury. Thus, our Aims are to determine: 1) how the activation of HSC alters the production of- and response to- Hh ligands;2) if the phenotype of different types of liver epithelial cells influences their response to HSC-derived Hh ligands, or their ability to elicit HSC production of Hh ligands;and 3) if modulating Hh signaling activity alters regeneration following liver injury. Results from this work will extend current understanding about the complex homeostatic mechanisms that maintain and restore liver architecture in adults. Such knowledge is likely to impact upon liver disease diagnosis, prevention and treatment and thus, has important clinical implications.